Hold Hindalco; target of Rs 185: ICICI Direct
ICICI Direct’s research report on Hindalco
Hindalco’s Indian operations reported a subdued set of Q1FY20 numbers. Revenue, EBITDA and PAT came in lower than our estimates. Aluminium segment reported sales of 320000 tonnes, up 6.7% YoY, down 1.5% QoQ (broadly in line with our estimate of ~325000 tonne) while copper sales were at 82000 tonnes (lower than our estimate of ~100000 tonne). The topline for Hindalco’s standalone operations + Utkal was at Rs 10055 crore (lower than our estimate of Rs 10573.1 crore). EBITDA of Hindalco’s domestic aluminium operations (including Utkal) was at Rs 889 crore (down 42% YoY, 16% QoQ), while copper segment EBITDA was at Rs 253 crore (down 24% YoY, 20% QoQ). PAT for Hindalco standalone +
Utkal was at Rs 167 crore, down 77% YoY, 67% QoQ. Novelis, on the other hand, reported a healthy performance that aided the overall consolidated performance for Q1FY20. Novelis flat rolled product (FRP) shipments increased 4% YoY to 830 KT while EBITDA/tonne was at US$ 448/tonne.
Hence, we expect the consolidated EBITDA margin to hover at the ~10.5-10.8% mark for both FY20E and FY21E (11.9% in FY19). We continue to value Hindalco on SOTP basis and arrive at a target price of Rs 185. We maintain our HOLD rating on the stock.
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